Rate setting, RROs, fixed contracts, etc. The makeup and processes for how utilities are priced in Medicine Hat has many in the community upset, confused, or both.--NEWS FILE PHOTO
cgallant@medicinehatnews.com@CollinGallant
The City of Medicine Hat – or any power company in Alberta – could offer one single rate to customers, according to provincial regulations, but it would have to be the floating rate that many say exposes them to wild price swings.
About 500 Hatters protested high bills Tuesday, calling for city councillors to explain rate setting, simplify the billing process and drive prices lower, potentially to a single rate offered to all based on cost recovery.
City officials said their rate offerings and business operations mimic best practices in the private utilities sector, a key point of the council-approved philosophy of the business unit.
Protest leaders say local power rates could be lowered based on local cost recovery, rather than current practice of moving rates to the provincial average price.
Options for relief are set to be debated next week in council to deal with record high prices for some power users. Demands include instituting major rate reforms to put Medicine Hat at the lowest price in the province.
“The city seems to be hiding behind its bylaws, but there is no reason they can’t change the rates,’ said Nicole Frey, who has launched a petition challenging council on a number of issues.
“The issue is ‘what’s the cost to produce one kilowatt of power?’ and (council doesn’t understand that.”
Last month top administrators pointed to council-approved operational philosophy that requires the division to operate similar to a private sector competitor in its practices to provide efficiency, best business practice and a benchmark to measure performance of the publicly owned operation.
The Alberta Utilities Commission confirmed to the News on Wednesday that a power distributor must provide customers with the regulated rate option (RRO).
But, it changes monthly and has spiked to record highs this summer across Alberta, leading provincial ministries to begin a review this fall.
There’s no legal requirement for companies to offer contract rates, fixed or variable pricing options. Though it’s not a requirement, most do as a matter of good business practice to manage risk and keep their revenue stable.
Often referred to as a “default” rate, the RRO provides a mechanism for customers to still receive and be billed for power if they don’t have a contract.
“It’s intended to be a platform for those who don’t have a contract or don’t qualify for a contract to get power,” said Geoff Scotton, a senior communication officer with the AUC.
The City of Medicine Hat does not require credit history for contract customers, as some other providers in the province.
Until recently, most Hatters, along with most Albertans, remained on default rates until those rates began to rise in the late 2010s. The city first added fixed-rate options in 2015, and last year changed the offerings as a way to better stabilize its revenue projections.
“We offer market competitive rates that customers would see in another place in Alberta,” said Travis Tuchscherer, the city’s director of energy market strategy. “And we don’t want to disadvantage our citizens or give them less choice than they would have in other places.
“That said we still want to provide that Medicine Hat advantage, which I feel is getting lost in the discussion a bit.”
In the past four years, the power plant that also sells onto the Alberta electrical system has returned $200 million in profits to the municipal treasury. That money is used or earmarked for capital projects, property tax subsidies, or to build an investment fund to tamp down property taxes.
At a meeting Tuesday speakers called for immediate relief and for council to lower rates and institute a less complex billing system.
A one-rate system is possible under current legislation governing power providers, but that would be the regulated rate option that has set a record pace this summer.
Premier Danielle Smith has stated that a review of the RRO system is a top priority for the utilities ministry.
The city began offering a fixed power rate in 2015, but at a rate set at the same level as a provincial government cap of $6.8 cents. Since it offered little upside, few took part.
When that provincial program was removed in 2019, interest spiked however, and by the end of 2022, when the city unveiled a new set of fixed-rate offerings, four out of five customers had a fixed contract.
That was driven by the chance to lock in the 2022 rate of 8 cents for power for an additional six months. After that however, accounts automatically fell back onto the default rate until the customer agreed to a new contract price.
Those who didn’t secure a new contract saw their rate on the default system charged above 30 cents, equal to a near five-fold increase.
